Seminar 217, Risk Management: The Ratio Problem

Seminar 217, Risk Management: The Ratio Problem

Risk Seminar
Nov 19, 2019, 11:00 AM - 12:30 PM | 1011 Evans Hall | Happening As Scheduled
Speaker: Frank Partnoy, UC Berkeley (Speaker - Featured)
ABSTRACT: We describe two problems – omitted variable bias and measurement error – that arise when a ratio is the dependent variable in a linear regression. First, we show how bias can arise from the omission of two variables based on a ratio’s denominator, and we describe tests for the degree of bias. As an example, we show that the familiar “inverse U” relationship between managerial ownership...